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Article October 10, 2019

Product recalls do happen

Manufacturers may not be aware of the value of product recall insurance or its role in risk transfer, but product recalls are a very real and frequent risk. Make sure your clients understand the importance of product recall insurance.

Product recalls of any kind can impact cash flow, squeezing a company’s ability to pay staff, purchase raw materials or even continue production. Frequently manufacturers will think they have cover and they don’t. Many companies will have adequate protection from third-party lawsuits, they often don’t have sufficient protection for their own costs.

Product recall insurance safeguards a manufacturing business from the financial impact of a recall, specifically the first and third-party costs associated with identifying and addressing the issue, conducting the recall and keeping the business operational.

Here are some common recall scenarios that can insurance can cover:

  • Faulty parts or components
  • Contamination of food or beverage products
  • Products that don’t meet a Kosher or Halal specification
  • Mislabelling of products
  • Accidental addition of animal by product, key for the vegan/vegetarian industry
  • Safety critical errors in software

Some of the most common objections to buying the cover that we think you will face are:

It won’t happen to me.

Recalls happen all the time, and are growing in frequency, particularly in the food and beverage industry where allergies, intolerance and the increase in health-conscious consumers is driving more scrutiny of products. Last year the Food Standards Agency issued 198 Food and Allergy Alerts alone.

But it’s not just food and beverage manufacturers at risk. Many first-time buyers are seeking recall insurance because they have recently experienced an uninsured product recall for the first time – the fact that they are now buying the insurance suggests they needed it all along and they appreciate the value of it.

Our quality assurance processes are top-notch.

Put simply, no critical control point in manufacturing or testing is fool proof, and therefore no business can be 100% certain they have prevented human error or malicious tamper. A manufacturer’s exposure to their supply chain is vast, the end product is only as good as its worst supplied component.

Our suppliers will pick up the costs.

Never rely on a supplier to manage the cost of a recall. In many cases, suppliers may refuse or be unable to pay, dispute the costs or have restricted their own rights under the supply agreement.

 

Want to know more? Get in touch at productrecall@cfcunderwriting.com